Analysts Just Shaved Their Robinhood Markets, Inc. (NASDAQ:HOOD) Forecasts Dramatically

The latest analyst coverage could presage a bad day for Robinhood Markets, Inc. (NASDAQ:HOOD), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

Following the downgrade, the current consensus from Robinhood Markets' twelve analysts is for revenues of US$1.9b in 2022 which - if met - would reflect a reasonable 3.9% increase on its sales over the past 12 months. The loss per share is anticipated to greatly reduce in the near future, narrowing 73% to US$1.16. However, before this estimates update, the consensus had been expecting revenues of US$2.3b and US$0.56 per share in losses. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.

See our latest analysis for Robinhood Markets

The consensus price target fell 28% to US$23.85, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Robinhood Markets at US$58.00 per share, while the most bearish prices it at US$15.00. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. It's pretty clear that there is an expectation that Robinhood Markets' revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 3.9% growth on an annualised basis. This is compared to a historical growth rate of 89% over the past year. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 3.8% annually. So it's pretty clear that, while Robinhood Markets' revenue growth is expected to slow, it's expected to grow roughly in line with the industry.

The Bottom Line

The most important thing to take away is that analysts increased their loss per share estimates for this year. There was also a drop in their revenue estimates, although as we saw earlier, forecast growth is only expected to be about the same as the wider market. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Robinhood Markets.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Robinhood Markets analysts - going out to 2024, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.